In the last few weeks we’ve started to come out of our stealth shell. We republished our corporate website with a little more detail of what we’re building. We started blogging, sprinkling in a little of our product vision. We’ve started letting people give us their email address so they can receive alerts and be invited to try the beta version of blist when we’re ready for that.

Over the last few days an interesting thing happened. Some of the key folks at Dabble DB signed up for our alerts and to join our beta. I like Dabble DB. Of all the web-based databases – Trackvia, Quickbase, Zoho Creator, eUnifyDB, Caspio and a few others, Dabble DB has been the most innovative. Clearly we plan to compete with them when we launch, but that’s not the focus of this post. Some of the guys on the blist team asked how we should respond. Should we suppress them from our email list? Should we email their founder and ask him what motivated him to sign up? It provided the impetus for a good philosophical discussion.

I think startups focus way too much on competitors and not nearly enough on customers.

Here’s a real world example from our early days at MessageRite. Email archiving services are comprised of two functional areas:

1) A set of processes that parse email messages and store them in an archive
2) A user interface that allows people to search for and review messages

When we started building the MessageRite service, we figured out how to parse and archive messages. We really had no idea what the user interface should do. Sure we knew that it needed both full-text search and some kind of structured search (for example, “find all email messages from Henry Blodget between April 5, 2001 and June 14, 2001“) but we didn’t know what else it should do. We could have taken one of two paths to solve that problem:

1) We could have done what our competitors do
2) We could have asked customers to tell us what our application should do

We chose the latter, not for any grandiose strategic reason other than I enjoyed talking to customers and was a little intimidated talking to competitors. While competitors want to annihilate you, with customers there is a win-win equation somewhere to be found.

You might think it would have been awkward to conduct sales calls while not having a very feature rich user interface. We turned it into an opportunity. We positioned it as “the fist companies to sign up for our service are going to have great influence over how the application works.” You know what? Prospects loved the idea. Finally a vendor was listening to them. What we learned over the next few months is that all email archiving solutions in the market suffered from the same inadequacy – poor compliance workflow. All of these prospects-turned-customers told us they were suffering real pain in fulfilling the obligations of reviewing emails and satisfying discovery requests. So that’s where we focused and how we differentiated ourselves in the market. Within 6 months we went from zero customers to turning customers away (due to our bandwidth limitations). It was a nice problem to have – much better than having built another me-too product nobody wanted.

By focusing on customers, not competitors, you have a much higher probability of creating a product the market really wants and that’s the key to not only startup success, but professional satisfaction.